Many people worldwide suffer from energy poverty, or a lack of access to affordable, healthy, and environmentally friendly sources of heat and light. Many poor households around the world currently pay relatively higher prices, in both money and time, for energy that is inferior at best and often dangerous. For example, many people in poor areas rely on inefficient three-stone wood or dung burning stoves for light, heat or both. Such energy technologies are linked to infant mortality, weak lighting and deforestation. Further, biomass stoves require people to spend considerable time gathering dung or firewood for energy. Often this task falls to young girls who would otherwise be in school. Smoke and pollution from burning such fires indoors can also lead to respiratory illness, especially in infants and small children. In addition to biomass, many people in poor areas rely on kerosene lamps to provide light. The cost of kerosene in many parts of the world can be quite high. Also, many of the basic lamp designs used today to provide poor light and often cause fire and/or significant injury when touched or knocked over by children or careless adults. In addition, biomass and kerosene energy sources emit carbon dioxide into the atmosphere, which is a known greenhouse gas.
Cleaner, safer and more efficient energy technology is known. For example, improved cook-stoves can provide greater safety and increase cooking efficiency relative to the traditional three-stone fire, thereby reducing greenhouse gas emissions. Simple biogas digesters can be used to convert manure and other organic materials into clean-burning methane gas, which may be used in place of wood, dung and kerosene for light, heat and cooking. Simple solar panels can be used to provide electricity for light as well as for radios, cell phones, and other communications technology that provide critical links to the outside world. It is anticipated that other technological advances will, in the future, provide further advantages to populations in the developing parts of the globe.
Even though simple technology exists to improve the energy situation of developing populations, the cost of the technology often makes it extremely difficult to implement where it is needed most. For example, it is difficult for a poor family to raise the necessary funds to purchase a solar system or even an improved efficiency stove. Also, even if families have the means to purchase additional technology, a lack of financing may stand in the way. For example, in many parts of the world the cost of a solar lighting system is equivalent to a typical poor family's expenditure on kerosene over a relatively short (e.g., two year) period. Also, for example, many local entrepreneurs would be able to leverage increased nighttime productivity to pay for the cost of a solar light system if only financing were available. Microfinance institutions (MFI's), such as Grameen Bank in Bangladesh and many others have attempted to fill this financing gap, however, high overhead costs and historic difficulties in obtaining capital have limited the growth of MFI's.
Some have recognized that, in addition to providing health and safety benefits to the world's poor, the implementation of improved energy technologies in the developing world would provide worldwide benefits due to the associated reduction in greenhouse gas emissions. Markets exist for monetizing carbon emission reductions. For example, the United National Framework Convention on Climate Change (UNFCC), often referred to as the Kyoto Protocol, resulted in the subsequent development of a worldwide market for carbon emission reductions. Further, the Kyoto Protocol's Clean Development Mechanism (CDM) allows developed nations to purchase carbon reduction credits from poor countries to meet carbon emission reduction targets. Further, many carbon purchasers are willing to pay a premium for “social carbon” offsets that are linked to social benefits such as energy access for the poor. Due to high transaction costs, though, it is difficult to bring small-scale carbon reductions to market. For example, a carbon finance firm typically will not consider processing a project that offers less than 10,000 tons of carbon, while a single solar home system for a poor household may only offset 5 tons in its lifetime. Accordingly, small-scale projects must be massively aggregates in order to be viable on the carbon markets. Large MFI's, such as the World Bank's carbon-financed Infrastructure Development Company and Grameen Shakti, have successfully aggregated carbon reduction credits from individual household projects, however, not all MFI's have the resources and the customer base to economically do so. This failure has prevented more widespread adoption of MFI techniques to improve the energy and lives of poor households.